NLRB Joint Employer Saga Comes to an End (for now) with New Final Rule

On February 26, 2020, the National Labor Relations Board issued a final rule governing joint-employer status under the National Labor Relations Act. The final rule restores the test that the Board had applied for several decades prior to the 2015 Obama-era decision in Browning-Ferris. The final rule also provides more clear guidance on the issue, which should be a welcome change for those seeking avoid a joint employer finding in this often shifting and murky area of the law.

The 2015 Browning-Ferris decision issued by the Obama Board vastly expanded the situations in which a franchisor or a source employer could be deemed a joint employer with its franchisee or with a user of a contingent workforce. In Browning-Ferris, the Board held that a joint-employer relationship may be found if two or more entities “are both employers within the meaning of common law, and if they share or codetermine those matters governing the essential terms and conditions of employment,” such as wages, hours, work assignments, and control over the number of workers and scheduling. The Board further found that a joint employer is not required to exercise its authority to control the terms and conditions of employment, and recognized that control may be “reserved, direct and indirect.”

In December of 2017, the Trump Board decided Hy-Brand Industrial Contractors, and announced that it would return to the prior standard that required proof of a joint employer’s actual exercise of control over essential employment terms, rather than merely having reserved the right to exercise control.

However, in late February 2018, the Board issued an order vacating Hy-Brand based on a determination by the Board’s Ethics Official that one of the three Members who participated in the decision should have recused himself. With that disqualification no Board quorum existed and the decision as set aside.

Then, in September of 2018, the Board issued a notice of proposed rulemaking regarding the standard for determining joint employer status. According to its Annual Performance and Accountability Report, the Board received nearly 29,000 comments on the proposed rules. After processing those comments, on February 26, 2020, the Board issued its final regulations. A fact sheet summarizing the final rule is available here.

As the fact sheet indicates, “a business is a joint employer of another employer’s employees only if the two employers share or codetermine the employees’ essential terms and conditions of employment.” Sounds similar, right? The Board went on to clarify the list of essential terms and conditions of employment as wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction. Critically, to be a joint employer, a business must possess and exercise substantial direct and immediate control over one or more essential terms and conditions of employment. No longer is indirect and contractually reserved but never exercised control alone enough to find joint-employer status. The final rule also defines many of the key terms used in the joint employer test.

The final rule certainly offers helpful guidance, and should result in fewer joint employer findings. The joint employer question is critical for a number of reasons, including exposure to liability under the Act, issues related to unfair labor practice charges, collective bargaining and more. In recent history, the Board has addressed the joint employer standard in a number of ways, but hopefully, the final regulations, which offer substantial clarity, will really be final, at least for a while.